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Article
Publication date: 24 August 2021

Yueling Xu, Haijun Bao, Wenyu Zhang and Shuai Zhang

Recently, the concept of financial technology (FinTech) has attracted extensive attention from international organisations and regulators, in particular, how to achieve a…

Abstract

Purpose

Recently, the concept of financial technology (FinTech) has attracted extensive attention from international organisations and regulators, in particular, how to achieve a “win–win” situation between financial institutions' FinTech innovation and effective regulation has become a hot topic. This study purposes to explore the evolutionary game relationship between FinTech innovation and regulation by constructing both static and dynamic earmarking game models.

Design/methodology/approach

A simulation experiment was conducted using primary data obtained from a commercial bank in China.

Findings

The results of the theoretical analysis of evolutionary game models were consistent with the corresponding simulation results, proving the validity of the proposed evolutionary game models. It was also found that the dynamic earmarking game model was more stable and effective than the static earmarking game model in promoting FinTech innovation and regulation. Furthermore, when the regulators utilised a dynamic earmarking mechanism, the evolutionary path of financial institutions and regulators' behaviour strategies took the shape of a spiral and eventually converged to a central point, indicating the existence of an evolutionary stable strategy and Nash equilibrium. Finally, because the behaviour strategies of financial institutions were mainly influenced by the regulators' policies, the regulators were inspired to adjust the corresponding regulation policies on FinTech innovation.

Originality/value

This study bridges the knowledge gap in the existing literature on financial innovation and regulation, in particular by establishing evolutionary game models from the perspective of financial earmarking policies. Also, the case study for simulation experiments can gain a more intuitive insight into FinTech innovation and financial earmarking policies.

Details

Industrial Management & Data Systems, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0263-5577

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Article
Publication date: 4 February 2021

Bryane Michael, Joseph Falzon and Ajay Shamdasani

This paper aims to derive the conditions under which a financial services firm will want to hire a compliance services company and show how much money they should spend.

Abstract

Purpose

This paper aims to derive the conditions under which a financial services firm will want to hire a compliance services company and show how much money they should spend.

Design/methodology/approach

This paper uses a mathematical model to show the intuition behind many of the compliance decisions that cost financial services firms billions every year.

Findings

This paper finds that hiring compliance firms may save banks and brokerages money. However, their advice may lead to an embarrass de riches – whereby the lower compliance costs and higher profit advantages they confer may lead to more regulation. Regulators may furthermore tighten regulation – with the expectation that financial service firms will adapt somehow. This paper presents a fresh perspective on the Menon hypothesis, deriving conditions under which financial regulations help the competitiveness of an international financial centre.

Research limitations/implications

The paper represents one of the first and only models of compliance spending by financial services firms.

Practical implications

This paper provides five potential policy responses for dealing with ever ratcheting financial regulations.

Originality/value

The paper hopefully launches literature on the compliance service industry – and the buy-or-do decision to engage in financial services compliance. This paper finds that efficient compliance can hurt firms, by encouraging regulation. This paper shows how firms can forestall the extra regulation that comes with easier internet and computerised monitoring.

Details

Journal of Modelling in Management, vol. 16 no. 1
Type: Research Article
ISSN: 1746-5664

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Article
Publication date: 20 July 2012

Richard Brophy

The purpose of this paper is to chart the chronology of insurance regulation in Ireland and evaluate the integration within European Union directives.

Abstract

Purpose

The purpose of this paper is to chart the chronology of insurance regulation in Ireland and evaluate the integration within European Union directives.

Design/methodology/approach

The approach used was to chart the development of insurance regulation in Ireland and establish the stakeholders in the insurance industry that are affected by regulation. The various aspects of the EU involvement in regulation were also listed.

Findings

Ireland is one of the few countries that has a single financial regulator that is the Central (Reserve) Bank. The Central Bank is recognised as the Irish national regulator for all insurance activities in the EU and with that carries responsibility for implementing EU directives. In comparing other regulatory systems, there is a mixture of direct government involvement, sector specific regulation, financial services regulation and Central Bank acting as regulator.

Research limitations/implications

Research is based on literature review and data obtained from the EU regarding national regulators. It does not set a standard of regulation or compare different regulators but establishes the different forms of regulation in Ireland and the EU.

Practical implications

The paper establishes Ireland's insurance regulatory environment amongst its European peers. It also charts the development of insurance regulation from solvency to the current model of solvency and consumer protection with the other offices of Financial Services Ombudsman.

Originality/value

The paper is based on research based on literature review and data obtained from the EU regarding national regulators.

Details

Journal of Financial Regulation and Compliance, vol. 20 no. 3
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 3 August 2021

Antony Rahim Atellu, Peter Muriu and Odhiambo Sule

This paper aims to establish the effect of bank regulations on financial stability in Kenya. Specifically, the study seeks to uncover the effect of micro and macro…

Abstract

Purpose

This paper aims to establish the effect of bank regulations on financial stability in Kenya. Specifically, the study seeks to uncover the effect of micro and macro prudential regulations on financial stability and their trade-offs or complementarities.

Design/methodology/approach

Using annual time series data over the period 1990–2017, the study uses structural equation model (SEM) estimation technique. This solves the problem of approximating measurement errors, using both latent constructs and indicator constructs.

Findings

Study findings reveal that macro and micro prudential regulations are significant drivers of financial stability. Further, prudential regulations are more effective when they complement each other.

Research limitations/implications

This study centers on how bank regulations affect financial stability. Future research could be carried out on the effect of Non-Bank Financial Institutions regulations on financial system stability.

Practical implications

Complementing macro and micro prudential regulation is more effective and efficient in ensuring stability of the financial system other than letting the two policy objectives operate independently.

Social implications

Regulatory authorities should introduce prudential regulations that would encourage innovations in the banking sector. This ensures easy deposit mobilization that enhances financial inclusion. Prudential regulations that ensure financial stability will be effective when low income earners are included in the financial system.

Originality/value

To the best of the authors’ knowledge, this study is the first to investigate the role of banking regulations on financial stability. This study is also pioneering in the use of SEM estimation technique, in examining how prudential regulations affect financial stability. Previous cross-country studies have focused on macro prudential regulations ignoring the importance of micro prudential regulations.

Details

Journal of Financial Regulation and Compliance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1358-1988

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Book part
Publication date: 1 January 2005

James A. Wilcox

Deregulation and other factors permit and encourage financial institutions to become more integrated, both within their own (financial) industries, such as banking and…

Abstract

Deregulation and other factors permit and encourage financial institutions to become more integrated, both within their own (financial) industries, such as banking and insurance, and across these industries. Financial regulators have responded with like integration. As financial institutions increasingly compete with firms from other industries and areas, financial regulators similarly compete more across borders. The resulting competition in financial regulation enhances innovation, choice, and efficiency. The advent of home-run regulation, which in general allows financial institutions to adhere only to the financial regulations of their home area and is spreading across the US and Europe, may allow numerous regulatory regimes within a given market.

Details

Research in Finance
Type: Book
ISBN: 978-0-76231-277-1

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Book part
Publication date: 1 December 2009

Dumitru Matiş, Jirí Strouhal and Carmen Giorgiana Bonaci

Purpose – Focusing on reporting for financial instruments, the paper tries to capture the role that regulations play within the complex mechanism of capital markets. The…

Abstract

Purpose – Focusing on reporting for financial instruments, the paper tries to capture the role that regulations play within the complex mechanism of capital markets. The outcome of financial reporting represents useful information for decision making. Meanwhile the mechanisms of the capital markets determine reactions on behalf of accounting regulatory bodies who take action through standard setting. It is these standards that will have a big influence on the aforementioned outcome of financial reporting. Beside, there are other influential factors such as accounting practices, the accounting profession, national history, culture, and economy acting at different levels. It was this reasoning that motivated this research demarche of achieving a complete diagnosis of two emergent capital markets, shaped into a SWOT analysis for financial instruments’ reporting and the current financial crisis.

Design/methodology/approach – A special emphasize is put on analyzing formal harmonization on issues related to financial instruments by performing an empirical study. Moreover, the analysis is completed by a descriptive approach of the influential factors such as economic, cultural, and political background of the two nations. The paper also comparatively positions the foresights of the national, European, and international referential. Statistical indicators help quantifying the similarity and dissimilarity degree.

Findings – In times of financial crisis, when everybody is trying to point his finger on somebody else, an empirical analysis of national accounting regulations proving a high level of formal harmonization with and among the international referential and European directives proves an interesting point. The results make us think twice before designating a scapegoat.

Research limitations/implications – The paper only creates the framework proving that individual experiences should be put into good use especially in an area that is continuously exposed to financial engineering. Further developments completing the study focusing on accounting regulations with accounting practices should indicate more precise actions to be taken.

Practical implications – Findings show a significant similarity level between the two national accounting standards, and most importantly between the international referential and the European accounting regulations, and should determine us to furthermore rationally approach the accounting regulation process instead of impulsive reacting to the current financial crisis.

Original aspects – The originality of the paper consists in offering insights on the specific case of Romania and Czech Republic, correlating the state of facts with the foresights of national accounting regulations, by reference to the international referential and the current financial crisis.

Details

Accounting in Emerging Economies
Type: Book
ISBN: 978-1-84950-626-7

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Book part
Publication date: 15 August 2014

John E. McEnroe and Mark Sullivan

The Dodd–Frank Wall Street Reform and Consumer Protection Act calls for substantially increased government regulation. Whether those regulations are, in some sense…

Abstract

The Dodd–Frank Wall Street Reform and Consumer Protection Act calls for substantially increased government regulation. Whether those regulations are, in some sense, appropriate is a function of whether the benefits of the increased regulation exceed the costs. Those costs and benefits, however, are probably impossible to measure, at least at this early stage of the implementation of the Dodd–Frank reforms. On the other hand, financial professionals who regularly deal with governmental regulations probably have a good sense of the costs and benefits based on their own experience with other similar regulations. This chapter reports the result of a survey of high-level auditors and CFOs regarding their perceptions of the costs and benefits of the main parts of the financial regulatory reform incorporated into the Dodd–Frank legislation. It concludes that there is support among these individuals for some aspects of Dodd–Frank, but no consensus.

Details

Managing Reality: Accountability and the Miasma of Private and Public Domains
Type: Book
ISBN: 978-1-78052-618-8

Keywords

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Article
Publication date: 9 February 2015

Alexander Stöhr

Financial crises pose a challenge to the legal systems of the concerned countries and international organizations. The current crisis has exposed significant failures of…

Abstract

Purpose

Financial crises pose a challenge to the legal systems of the concerned countries and international organizations. The current crisis has exposed significant failures of regulation and supervision, making the Financial Market Law a key topic on the political agenda. Thus, great changes and challenges are ahead of us. These were the focus of an interdisciplinary and comparative conference held at the University of Marburg. The paper deals with the individual presentations and carries out an overall analysis.

Design/methodology/approach

The paper covers the most important issues in financial regulation.

Findings

An extensive regulation is confronted with several obstacles; suitable approach could be the co-regulation; desirable aim is the instauration of the mechanism of capital markets. Those who gain the benefits in case of success should also bear the losses in case of failure instead of being rescued at taxpayers’ expense.

Originality/value

The difficulties arising from extensive regulation suggest a more liberal approach to financial regulation.

Details

Journal of Financial Regulation and Compliance, vol. 23 no. 1
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 8 July 2014

Olivia Anku-Tsede

This study aims to seek to fill a gap in regulatory impact assessment in developing countries by presenting an analysis of how formal regulation impact on the efficiency…

Abstract

Purpose

This study aims to seek to fill a gap in regulatory impact assessment in developing countries by presenting an analysis of how formal regulation impact on the efficiency and productivity of financial non-governmental organisations (FNGOs) in Ghana. Much has been written about the formal financial sector, but very little is known about the lower end of microfinance and the impact of formal prudential regulation on FNGOs providing microfinance services. The Bank of Ghana (BOG), nevertheless, in the year 2011, extended formal prudential regulation to FNGOs without any empirical basis. This study uses regulatory theories and empirical evidence to aid in the evaluation of whether formal prudential regulation is appropriate for FNGOs operating within the microfinance sector.

Design/methodology/approach

Empirical evidence derived from FNGOs, regulatory agents, consumers and financial lawyers within the Greater Accra and Ashanti Regions of Ghana served as the basis of the analysis in this study. Descriptive statistics, frequency counts and percentage scores, were used to analyse the data collected.

Findings

The existing structures of FNGOs in Ghana are unsuitable for formal prudential regulation. The BOG does not have adequate staffing and funding to supervise and monitor the microfinance activities of FNGOs. Formal prudential regulation could impede growth and efficient delivery of microfinance services.

Research limitations/implications

The BOG is the only regulatory agency responsible for regulating the financial market in Ghana, thus access to officers with knowledge in the regulatory regime was very limited.

Practical implications

The study revealed in depth information about FNGOs, microfinance and the impact of formal prudential regulation on FNGOs.

Originality/value

The study is the first to use empirical studies and theories of regulation to assess the impact of extending formal prudential regulation to FNGOs in Ghana. Data from the regulator, the regulated and consumers, the key players in any regulatory process, served as the basis of the analysis in the study resulting in the unravelling of in-depth information on the regulation of FNGOs.

Details

International Journal of Law and Management, vol. 56 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

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Article
Publication date: 1 April 1998

Richard Dale and Simon Wolfe

Several recent developments (notably, the breakdown of traditional distinctions between different types of financial activity, the globalisation of financial markets and…

Abstract

Several recent developments (notably, the breakdown of traditional distinctions between different types of financial activity, the globalisation of financial markets and increasing emphasis on systemic stability as a regulatory objective) have prompted policy‐makers to search for an ‘optimum’ regulatory structure that is adapted to the new market environment. Further impetus has been given to this debate by the radical overhaul of regulatory structures, along quite different lines in Australia, the UK and Japan, and the ongoing deliberations within the US Congress over structured financial reform. This paper examines alternative ways of organising the regulatory function in the context of the new financial market environment. The first section reviews the objectives, targets and techniques of regulation. The second section describes the new market environment and the restructuring of the financial services industry. The third section assesses the implications of this new environment for the structure of regulation. The fourth section addresses the international dimension. The final section provides a summary and conclusion. The paper is based on a presentation made at the World Bank Conference, El Salvador, June 1998.

Details

Journal of Financial Regulation and Compliance, vol. 6 no. 4
Type: Research Article
ISSN: 1358-1988

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